IMF chief calls US budget cuts "inappropriate"

8 July 2013

The US federal budget cuts have been labelled "inappropriate" by IMF chief Christine Lagarde.

She is now urging Washington to present credible fiscal plans for the future after it implemented across the board federal government spending cuts in March, Reuters reports.

The cutbacks, known as the sequester, were introduced after Congress could not agree on an alternative measure. It was put in place as a contingency plan to ensure politicians would strike a deal, but it failed.

"The budgetary procedure that is in place in the United States, which leads to a budgetary adjustment, seems to us absolutely inappropriate," Lagarde told an economists' conference in Aix-en-Provence, southern France.

She claimed it affects certain expenditures that are essential to support medium and long term growth in the country.

The IMF forecast growth in the US would stand at 1.9 per cent this year in its annual check of the health of its economy. It believes the figure would be as much as 1.75 percentage points higher if the pace to cut the government's budget deficit was slower.

By Claire Archer

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